Reduce mobile termination rates to boost competition
The mobile termination rate is important as it affects the price of phone calls.
In March 2019, the National Assembly ICT Committee released a report on competition in the telecommunications sub-sector. A key issue before the committee was the cost of terminating calls from one mobile network onto another network.
The mobile termination rate (MTR) is important as it affects the price of phone calls. When a subscriber on network A makes a call to a subscriber on network B, the operator of network A pays the operator of network B an interconnection fee for terminating the call on its network.
In Kenya, the prevailing MTR is Sh0.99 (99 cents) and was set by the Communications Authority of Kenya (CA) in 2010. The market has, however, changed significantly over the past 10 years. For instance, there were about 25 million mobile users in Kenya in 2010, compared to 57 million in 2020. CA data shows calls termination amounted to more than seven billion minutes last year.
The recent announcement by CA that it would review and align prevailing rates with market realities is timely.
However, MTR remains a highly contentious issue, going by the ICT Committee report, which is publicly available on the Parliament website. There are two opposing views as captured in the report.
Some operators argued the current rates are too high and called for asymmetric MTRs to promote competition. This would mean smaller market players paying lower termination rates. South Africa, Nigeria and Mexico are cited as countries where asymmetrical rates have worked. Zero MTR was proposed as an alternative that would reduce call tariffs and level the playing ground.
The opposing side argued that asymmetric and zero MTRs would discourage investment and see the cost of termination being passed on to the poor consumers.
The Hon. William Kisang-led House team advised CA to consult and find a way of reducing MTR to zero in two years. It also directed the ICT ministry to publish regulations on fair competition, equality of treatment, tariffs and interconnection. The two years have already elapsed, yet these reforms are key to competition and lower call charges, which now attract 20 per cent excise duty.
